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Texas Legislature Passes Decommissioning Statutory Requirements on Wind Energy Land Leases

The Texas legislature recently passed House Bill 2845 modifying Section 301 of Title 6 of the Texas Utilities Code to impose statutory decommissioning requirements on any person (“Wind Developer”) that leases property from a landowner for the operation of a wind power facility. The new statute affects all wind power facility lease agreements entered into on or after September 1, 2019. Such lease agreements must provide that Wind Developer is responsible for the removal of wind power facilities from the landowner’s property at the end of the lease term.

The bill was originally filed and supported by the Texas Farm Bureau and other landowner groups, while being opposed by various energy industry companies and groups for what they perceived as the creation of an imbalance in the division of costs and liabilities associated with the decommissioning of the wind power facility. After amendments in committee and on the house floor, the bill passed unanimously both in the House and the Senate.

Wind Developer’s decommissioning responsibilities that must be included in lease agreements consist of (i) clearing, cleaning and removal of each wind turbine generator, including towers, pad-mount transformers, and all liquids, greases and other similar substances; (ii) for each tower foundation, pad-mount transformer and buried cable that is installed, cleaning, clearing and removal to a depth of at least three feet below the surface grade; (iii) filling any hole or cavity that is created by the removal process with the same type of topsoil as the predominant topsoil found on the property; and (iv) at the request of the landowner, removing any road constructed by Wind Developer on the property and, if reasonable, removing all rocks at least one foot in diameter that are excavated during the removal process to ensure that the land is returned to a tillable state.

In addition, lease agreements must require Wind Developer to secure, not later than the earlier of the 10th anniversary of the commercial operations date or termination of the lease agreement, evidence of adequate financial assurances conforming with the statute for all decommissioning efforts. Acceptable forms of financial assurances include, (i) a guaranty from a parent company with minimum investment grade credit rating, (ii) a letter of credit, (iii) a bond, or (iv) any other form of financial assurance that is accepted by the landowner. The estimated cost of removing the wind power facility is to be determined by an independent Texas licensed third-party engineer. Wind Developer’s amount of financial assurance must be equal to at least the estimated amount of the cost of removal and restoration that exceeds the salvage value, less any portion of the value of the wind power facility that is pledged to secure the outstanding debt. The lease agreement must provide that Wind Developer will deliver to the landowner an updated estimate of the removal costs once every five years for the remainder of the term of the agreement.

Any provision in the lease agreement attempting to waive Wind Developer’s decommissioning responsibilities or to limit Wind Developer’s liabilities under the lease will be deemed void. If the landowner is harmed by Wind Developer’s breach of its responsibilities to remove the wind power facility, the landowner will be entitled to injunctive relief in addition to all other procedures and remedies available at law. 

© 2020 Foley & Lardner LLPNational Law Review, Volume IX, Number 214

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Real estate attorney Randy Jones has over 30 years of real estate and finance experience, with a noted track record in the rehabilitation of historic theaters and performing arts venues. His projects have included multiple iconic buildings, such as the Saenger Theatre in New Orleans and Loew’s Kings Theatre in the heart of Brooklyn.

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